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Financing your energy projects - Queensland Farmers' Federation
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Financing your energy projects

Once you’ve identified energy savings or renewable energy opportunities for your farm, the next challenge is to find the funds or finance to make it happen.

There are a number of options to either reduce up-front costs or reduce the borrowing costs for the project.  These can include new efficient pumps, motors, compressors, vehicles, lights, renewable energy systems and many other products.

FACT SHEET:  FINANCING ENERGY EFFICIENCY AND RENEWABLE ENERGY

Please see the Energy Savers Fact Sheet for details on finance and funding for energy efficiency and renewable energy initiatives. View fact sheet HERE.

REDUCING BORROWING COSTS: FINANCING OPTIONS

Financing is where money is lent for a project and must be repaid over time – either in a conventional loan repayment schedule, or out of the energy cost savings for the projects. There are a number of options, and three are presented here:

  • Energy Efficiency Loan.
  • Energy Services Agreement.
  • Solar Power Purchase Agreement.

Each of these financing structures have advantages and disadvantages. The choice of product depends on the farm’s specific requirements.

ENERGY EFFICIENCY LOANS

Energy efficiency loans are becoming more widely available in the marketplace. These loan products are tailored to overcoming barriers to energy efficiency implementation. In practice these loans are similar to equipment financing with preferable rates or longer loan periods.

Lower interest rates are available for energy efficiency and renewable energy projects through low interest loans provided through The Clean Energy Finance Corporation’s (CEFC) Co-Financing Partnerships.   Discounts of up to 0.7% off equipment finance rates plus longer terms are available, with security generally on the equipment.  These are available through the National Australia Bank, Commonwealth Bank and Westpac.

QRAA, a Queensland Government Agency, offers a “Sustainability Loan” of up to $1.3M to assist with productivity and efficiency projects.  Low interest rates and fixed rates (currently as low as 3.11%) are available and they may work with your bank to co-fund a project.

More details on Energy Efficiency Loans are provided in the Energy Savers Fact Sheet.

ENERGY SERVICES AGREEMENTS

The Energy Services Agreement model or “Turnkey Solution” is where an Energy Services Company designs, installs and finances the project.  In this case, you may not have any upfront costs and repay the cost of the project out of energy cost savings. In some cases, the project may be cash-flow positive from day 1.

More details on Energy Services Agreements are provided in the Energy Savers Fact Sheet.

The Energy Savers Fact Sheet’s Quick Reference Guide compares a number of options available to reduce borrowing costs for efficiency and renewable energy equipment.

SOLAR POWER PURCHASE AGREEMENTS (PPAS)

A Solar PPA is a financial mechanism where a provider installs, owns and operates a solar photovoltaic (PV) system on your property, selling you electricity generated on site at an agreed tariff, and agreed escalation rate.   A number of companies are now offering Solar PPAs.

Advantages:

  • No capital cost for the project
  • An Agreed energy price for the life of the contract for the power generated from the solar PV system
  • The provider is responsible for maintenance and performance

Disadvantages:

  • May not suit strongly seasonal businesses
  • You will receive two invoices – one from your current retailer for grid electricity and network charges, and one from the Solar PPA Provider
  • Minimum contract periods may apply

REDUCING UP-FRONT COSTS: FUNDING OPTIONS

GRANTS AND FUNDING

There are a small number of initiatives to gain funding or grants including:

  • Innovation grants for innovative renewable energy projects through the Australian Renewable Energy Agency (ARENA);
  • Demand Management and Power Factor Correction activities in certain areas within the Ergon and Energex network areas
  • The Emissions Reduction Fund.

For Details of the programs above, please refer to the Energy Savers Financing Energy Efficiency and Renewable Energy Fact Sheet.

THE RENEWABLE ENERGY TARGET

Solar Photovoltaic (PV) Systems and other renewable energy technologies may be eligible for Renewable Energy Certificates under the Renewable Energy Target (RET).

For Solar PV systems up to 100kW a Small-scale Technology Certificates (STC) is credited (deemed) for each megawatt hour MWh the system is expected to generate until the end of the program in 2030.   The value of the STCs will be deducted from the purchase price of your system by your supplier, reducing the purchase price of the system.  In 2017, the deeming period reduced to 14 years, and will now reduce by a year on 1 January each year, slightly reducing the system discount.  STCs are also credited for solar or heat pump hot water systems, wind turbines up to 10kW and small-scale hydro plants up to 6.4kW capacity.

Larger renewable energy systems of over 100kW create a Large Scale Generation Certificate (LGC) for each MWh of renewable energy once it has been generated.  LGCs are then sold or traded at a negotiated price, usually to retailers or other businesses that have an LGC liability through an open LGC market.  The price of LGCs fluctuates based on supply and demand and the income from LGCs occurs after the energy has been generated.  It will therefore not reduce the purchase price of the system, but provide a revenue stream.

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The owner of the electricity distribution network, or Distribution Network Service Provider (DNSP) in Queensland is Energy Queensland, which has recently been formed by the amalgamation of Ergon Energy and Energex.

ERGON ENERGY

Ergon Energy is the network distribution business for regional Queensland.   See Ergon’s Agriculture Page, which outlines the Ergon Agricultural Forum, complementary tariff checks, drought assistance such as waived charges and deferred payments and other relevant information HERE

Use Ergon’s Incentive Search (search by map, address or NMI) to see if you are in an area where there are cashback incentives for reducing demand or improving power factor.

ENERGEX

Energex is the network distribution business for South East Queensland.  Energex’s business website outlines a number of programs available to businesses in eligible areas to reduce demand and improve power factor. See HERE

POWER FACTOR

Find out more about power factor and how you may be able to make energy and cost savings with power factor correction (PFC) at the Ergon and Energex websites.